HAYWARD INDUSTRIES, INC. v. NINGBO C.F. ELECTRONICS CO., LTD. AND OTHERS

HCA 2340/2024

[2026] HKCFI 4984

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2340 of 2024

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BETWEEN

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DECISION

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A. Introduction

1.  By decision herein dated 14 October 2025 ([2025] HKCFI 5252) (the “Previous Decision”)[1]:-

(1) I adjourned (i) the Plaintiff’s Summary Judgment Application against the 1^st Defendant and (ii) the 1^st Defendant’s Security for Costs Application against the Plaintiff, pending the resolution of the US Appeal;

(2) I granted leave for the parties to file further evidence on the question of “whether the Compensatory Judgment Debt and the Punitive Judgment Debt arose from separate causes of action, namely (i) violation of the Lanham Act and (ii) violation of the North Carolina Unfair and Deceptive Practices Act, and whether these causes of action are ‘isolatable’”;

(3) I dismissed the Plaintiff’s Summary Judgment Application against the 2^nd Defendant;

(4) I allowed the 2^nd and 3^rd Defendants’ Security for Costs Application against the Plaintiff; and

(5) I dismissed the parties’ Stay Applications in respect of the Costs Order dated 6 June 2025 and Costs Order dated 4 July 2025.

B. Material Background and Further Development

2.  The material background relating to these proceedings was set out in paragraphs 2 to 19 of my Previous Decision. I do not intend to repeat the same.

3.  For present purposes, it suffices to say that since my Previous Decision was given, the following developments have taken place:-

(1) First, by a judgment dated 24 March 2026 (the “US Appeal Judgment”), the US Appeal Court dismissed the US Appeal, and the US Judgment in favour of the Plaintiff was affirmed.

(2) Second, the parties have filed evidence from US law experts to address the question mentioned in paragraph 1(2) hereinabove.

(3) Third, pursuant to my order in respect of the 2^nd and 3^rd Defendants’ Security for Costs Application, the Plaintiff paid HK$1.2 million into court.

4.  In light of the aforesaid developments, the proceedings in respect of (i) the Plaintiff’s Summary Judgment Application against the 1^st Defendant and (ii) the 1^st Defendant’s Security for Costs Application against the Plaintiff have been restored.

5.  Meanwhile, the 2^nd and 3^rd Defendants took out a summons dated 26 January 2026 seeking payment out in respect of HK$948,520 (the “Payment Out Application”).

C. The Summary Judgment Application against the 1^st Defendant

6.  I repeat the analysis set out in paragraphs 21 to 39 of my Previous Decision.

7.  As stated in paragraphs 28 and 29:-

“28. Like the learned Judge, I am inclined to the view that it would be difficult to refute Cockerill J’s analysis in SAS Institute Inc v World Programming Ltd [2019] FSR 30 at paras 238 to 248, and it appears that the focus is on the cause of action. If the compensatory component and the punitive component of a judgment are based on the same cause of action, the court will have to refuse to entertain the enforcement proceedings as it cannot only enforce the compensatory component of the judgment but not the non-compensatory component of the same judgment. However, if the compensatory award and the punitive award are based on separate causes of action, it can be said that there are “separate” judgments that are “isolate-able”, such that the compensatory award can be enforced.

29. In the premises, the real issue in dispute is whether there are separate causes of action that gave rise to the awards in respect of the Compensatory Judgment Debt and the award in respect of the Punitive Judgment Debt.”

8.  As stated in paragraph 31:-

“31. The learned Judge’s analysis of the evidence was meticulous and convincing. In light of the learned Judge’s analysis, I am skeptical about the Defendants’ suggestion that the awards in respect of the Compensatory Judgment Debt and the award in respect of the Punitive Judgment Debt derived from the same cause of action. It is doubtful whether this was the case. It appears that the trebling of the award of US$4,900,000 was purely based on the 1^st Defendant’s violation of the North Caroline Unfair and Deceptive Practices Act. This appears to be separable from (i) the Plaintiff’s causes of action based on false advertising in violation of section 43(a) of the Lanham Act as well as copyright infringement; and (ii) the US Costs Order.”

9.  Mr Tony Ko, together with Mr Sean O’Reilly, (for the Defendants) drew my attention to Motorola Solutions Inc v Hytera Communications Corp Ltd [2026] 1 WLR 2080, which the English of Appeal handed down after my Previous Decision was given.

10.  In Motorola Solutions Inc at paras 11, 56 to 59, 75, 77, and 137, the English Court of Appeal (Sir Geoffrey Vos MR and Popplewell LJ) held that where a court of an overseas country gives a “judgment for multiple damages”, section 5 of the Protection of Trading Interests Act 1980 (the “1980 Act”) (which is equivalent to section 7 of our PITO[2]) prohibits enforcement of the whole of that judgment, which includes both the compensatory and non-compensatory elements of the damages award, rather than merely prohibiting enforcement of the non-compensatory element of the award. Bearing in mind that section 6 of the 1980 Act treats the compensatory element of a damages award as part of the judgment for multiple damages and that section 5 of the 1980 Act discourages claimants from seeking judgments for multiple damages and ensures that the English courts would not lend their assistance to the enforcement of the non-compensatory elements of damages awards, any sum payable under the judgment for multiple damages, such as ancillary awards of fees and disbursements, are also caught and thus unenforceable.

11.  I am not of the view that Motorola Solutions Inc would avail the 1^st Defendant. As indicated in paragraphs 28, 29 and 31 of my Previous Decision, the unique feature of the present case is that the compensatory award and the punitive award might arise from “separate” causes of action; as such, it may be said that there are “separate” awards arising from these “separate” causes of action that are “isolate-able”, such that the compensatory award can be enforced.

12.  Contrary to Mr Ko and Mr O’Reilly’s suggestion, in Motorola Solutions Inc, the English Court of Appeal did not address this issue at all (which did not arise in light of the facts of that case and the way in which the contentions were pursued). I am not of the view that Motorola Solutions Inc supports the proposition that so long as a plaintiff obtained a punitive award under a cause of action, he should ipso facto be barred from enforcing a “separate” compensatory award that arose from another “separate” cause of action.

13.  It appears to me that this proposition is unsound in principle.

14.  As a starting point, section of the PITO reads as follows:-

“7. Restriction on enforcement of certain overseas judgments

(1) A judgment to which this section applies shall not be registered under the Foreign Judgments (Reciprocal Enforcement) Ordinance (Cap. 319) and no court in Hong Kong shall entertain proceedings at common law for the recovery of any sum payable under such a judgment.

(2) This section applies to any judgment given by a court of a place outside Hong Kong, being a judgment-

(a) for multiple damages within the meaning of subsection …

(3) In subjection (2)(a), a judgment for multiple damages means a judgment for an amount arrived at by doubling, trebling or otherwise multiplying a sum assessed as compensation for the loss or damage sustained by the party in whose favour the judgment is given.”

(emphasis added)

15.  Section 7 of the PITO merely prohibits enforcement of “a judgment for multiple damages”. In light of Motorola Solutions Inc and SAS Institute Inc, I accept that where a foreign award contains both “punitive” and “compensatory” components, the entire award cannot be enforced. However, there is nothing in section 7 of the PITO providing that the enforcement of any “compensatory” damages should be prohibited. There are situations where there are two distinct awards in the foreign proceedings, in that one of them is for “compensatory” damages, whereas the other is for “multiple” or “punitive” damages. In my view, it cannot be said that the “compensatory” award and the “multiple” or “punitive” award necessarily constitute one single award that is caught by section 7 of PITO. This depends on the circumstances, and one of the most important matters to consider is whether these awards arose from the same cause of action.

16.  As a matter of practicality and convenience, like the courts in Hong Kong, a foreign court would usually, at one go, give a “composite” judgment that disposes of all the parties’ disputes based on various causes of action. It is unusual for a court to give separate judgments in respect of each of the causes of action that is relied upon by the claimant. I am unable to see any logical reason why a claimant may not seek to rely on a “separate” cause of action that gave rise to a “separate” award. It would be absurd and arbitrary if the reason is that the courts would usually, out of practicality and convenience, resolves all the parties’ disputes at one go under a composite document.

17.  It is important to consider the rationale behind the statutory regime under the PITO. In this connection, it is incontrovertible that the foremost objective of section 7 of the PITO is to ensure that the local courts would not lend their assistance of the enforcement of a penal element of a multiple damages award. I cannot see how it can be said that this underlying objective would be undermined if a plaintiff is allowed to enforce a “separate” compensatory award arising from a “separate” cause of action that is “isolatable” from the other cause of action that gave rise to the punitive award. There is simply no “penal element” in respect of the “separate” cause of action that gave to the compensatory award.

18.  In the premises, I am of the view that it is permissible for the Plaintiff to enforce a “separate” compensatory award arising from a “separate” cause of action that is “isolatable” from another cause of action that gave rise to another punitive award.

19.  Thus, the question to be resolved in the present case is whether it can be said that there are “separate” causes of action that gave rise to “separate” awards that are “isolatable”.

20.  It is the Plaintiff’s case that:-

(1) Its cause of action based on 1^st Defendant’s violation of the Lanham Act gave rise to the Compensatory Judgment Debt. This purely derives from a compensatory award and is hence enforceable.

(2) Its cause of action based on 1^st Defendant’s violation of the North Carolina Unfair or Deceptive Trade Practices Act (which triggered the “trebling” of the compensatory award) gave rise to the Punitive Judgment Debt. This derives from a punitive award and is hence unenforceable.

21.  By now, I have the opportunity to study the opinion of the US law expert engaged by the Defendants, namely Professor Christopher Buccafusco.

22.  In short, Professor Buccafusco opined that the issuance of a single judgment document shows that the underlying claims pursued by the Plaintiff in the US Litigation were indivisible or inseparable.

23.  With no disrespect to Professor Buccafusco, his analysis is unconvincing. I repeat the analysis set out in paragraph 16 above.

24.  Meanwhile, Professor Deborah Gerhardt, who was engaged by the Plaintiff, helpfully referred me to the verdict form, which the trial judge (ie Judge Cogburn) provided to the jury (the “Verdict Form”). In my view, the Verdict Form speaks volumes:-

(1) Under question 7, the jury was asked[3] to determine whether the 1^st Defendant violated the Lanham Act by making false or misleading statements in commercial advertising that deceived consumers or were likely to deceive consumers in a material way that caused harm to the Plaintiff. The jury answered question 7 in the affirmative.

(2) To differentiate liability under the Lanham Act as set forth in question 7, question 9 does not include the text of the Lanham Act; instead, it expressly set out the North Carolina Unfair or Deceptive Trade Practices Act. Question 9 asks “Has the Plaintiff Hayward proved that Defendant Ningbo CF violated the North Carolina Unfair or Deceptive Trade Practices Act?” The jury also answered question 9 in the affirmative.

25.  The questions under the Verdict Form clearly shows that the jury was directed to consider the two causes of action based on the Lanham Act and the North Carolina Unfair or Deceptive Trade Practices Act in isolation. The two causes of action were dealt with separately under two distinct questions (ie question 7 and question 9). It was not the case that they were merged or dealt with together collectively.

26.  Under question 10 of the Verdict Form, the jury was directed to determine the amount of the Plaintiff’s loss of profit. As pointed out by Professor Gerhardt, it would have been inappropriate for Judge Cogburn to ask the jury to order separate compensatory damages. This was because the two causes of action based on the Lanham Act and the North Carolina Unfair and Deceptive Trade Practices Act arose from the same material facts. Thus, the Plaintiff should not have been awarded compensatory damages twice.

27.  It is important to stress that the amount awarded by the jury under question 10 was the actual damages for compensating the Plaintiff’s loss of profit. The Verdict Form did not provide the jury with any opportunity to award punitive damages. As emphasized by Professor Gerhardt, the trebling was done by Judge Cogburn based on application of the provisions in the North Carolina Unfair or Deceptive Trade Practices Act. This was not done by the jury. This had nothing to do with the Lanham Act.

28.  I am satisfied that the cause of action based on the Lanham Act and the cause of action based on the North Carolina Unfair or Deceptive Trade Practices Act are in fact “separate” and “isolatable”.

29.  This conclusion was fortified by the fact that in the judgment regarding the contempt on the part of the defendants in the US Litigation, Judge Cogburn stated that:-

“The jury awarded the Plaintiff $4,900,000 in compensatory damages for false advertising under the Lanham Act and, alternatively, for violation of the [North Carolina Unfair or Deceptive Trade Practices Act] ” (emphasis added)

30.  It is important to stress that the cause of action based on the North Carolina Unfair or Deceptive Trade Practices Act is an “alternative” to the cause of action based on the Lanham Act that gave rise to the compensatory damages of US$4.9 million.

31.  In the premises, had the Plaintiff abandoned the cause of action based on violation of the North Carolina Unfair or Deceptive Trade Practices Act or had such a cause of action failed, the Plaintiff would still have succeeded on the cause of action based on violation of the Lanham Act, and the jury would still have awarded US$4.9 million in favour of the Plaintiff as compensatory damages.

32.  In my view, the two causes of action are plainly “separate”, “distinct”, and “isolatable”.

33.  Having said that the “trebling” was done by Judge Cogburn (not the jury) based on application of the provisions of the North Carolina Unfair or Deceptive Trade Practices Act (not the Lanham Act), it is also plain that the “compensatory” award is purely based on the cause of action under the Lanham Act, which is “isolatable” from the “punitive” cause of action based on the North Carolina Unfair or Deceptive Trade Practices Act. It cannot be said that the “compensatory award” is tainted by the “punitive’ or “penal” elements under the North Carolina Unfair or Deceptive Trade Practices Act.

34.  For the above reasons, I conclude that the Plaintiff is plainly entitled to enforce the “separate” and “isolatable” compensatory award arising from the cause of action based on the Lanham Act. It was not tainted by the “trebling” that was done by Judge Cogburn pursuant to the provisions of the North Carolina Unfair or Deceptive Trade Practices Act, which constituted a separate cause of action giving rise to a separate punitive award.

35.  For completeness, I should also deal with the miscellaneous contentions that were raised on behalf of the 1^st Defendant.

36.  Professor Buccafusco queried whether the jury in the US Litigation awarded damages that combined the injuries associated with the Lanham Act and the North Carolina Unfair or Deceptive Trade Practices Act.

37.  In light of the way in which question 10 of the Verdict Form was drafted, the jury was clearly asked to award “compensatory” damages based on the Plaintiff’s loss of profits. There is no evidential basis for the Defendants to suggest that the jury might have attributed or took into account the penal elements under the North Carolina Unfair or Deceptive Trade Practices Act in awarding “compensatory” damages of US$4.9 million in favour of the Plaintiff. In my view, Professor Buccafusco’s query is speculative and without evidential foundation.

38.  Professor Buccafusco also suggested that the Plaintiff had elected to seek remedies under the North Carolina Unfair or Deceptive Trade Practices Act, as opposed to the Lanham Act.

39.  I disagree. The Plaintiff was never required to make an election, and it had not made an election as alleged. It appears that Professor Buccafusco had conflated the concept of “claims” with the concept of “remedies”. Obviously, if two claims (such as the claim under the Lanham Act and the claim under the North Carolina Unfair or Deceptive Trade Practices Act) seek the same remedy (such as compensatory damages), it is not necessary to make an election of remedies. There is simply nothing to elect. An election is only necessary when a party must choose between two remedies that are “inconsistent” with each other.

40.  As evidenced by the contempt judgment mentioned above, the reality in the present case was such that upon finding that the 1^st Defendant had violated the Lanham Act and “alternatively” the North Carolina Unfair or Deceptive Trade Practices Act, the jury awarded “compensatory” damages in favour of the Plaintiff in the amount of US$4.9 million. At this point, the award of damages did not carry any “punitive” or “penal” element, and it was purely “compensatory” in nature. The “punitive” or “penal” elements were only injected at the point when Judge Cogburn “additionally” applied the provisions of North Carolina Unfair or Deceptive Trade Practices Act to treble the award of damages in favour of the Plaintiff. As already pointed out, the Plaintiff did not even need to rely on the North Carolina Unfair or Deceptive Trade Practices Act in order to obtain the award of “compensatory” damages. Put simply, the remedy in respect of “compensatory” damages is simply not inconsistent with the remedy in respect of “punitive” damages. Judge Cogburn simply “additionally” awarded “punitive” damages based on the operation of the North Carolina Unfair or Deceptive Trade Practices Act. This was a “penal” cause of action that was separate from the “compensatory” cause of action based on the Lanham Act. Since no inconsistent remedies were involved, the question of election simply did not arise.

41.  In light of the analysis canvassed hereinabove, I conclude that the Defendant does not have a viable defence to the Plaintiff’s claim for recovering the Compensatory Judgment Debt.

42.  For completeness, I should also put on record that in light of the outcome of the US Appeal, Mr Ko and Mr O’Reilly sensibly no longer contended that the US Judgment was obtained in circumstances where the principles of natural justice were breached.

43.  I, accordingly, enter summary judgment against the 1^st Defendant in terms of prayer 2 as pleaded in the Plaintiff’s statement of claim dated 3 March 2025, and the 1^st Defendant shall pay the Plaintiff the sum of US$7,416,736.58 (being the Compensatory Judgment Debt). I also order that there be interest at 1% above prime rate from the date of the US Judgment to the date of this decision, and thereafter interest at judgment rate until payment in full.

D. The 1^st Defendant’s Security for Costs Application against the Plaintiff

44.  Since I entered summary judgment against the 1^st Defendant, the 1^st Defendant’s Security for Costs Application against the Plaintiff simply falls away.

45.  I, accordingly, dismiss the 1^st Defendant’s Security for Costs Application against the Plaintiff.

E. The 2^nd and 3^rd Defendants’ Payment Out Application

46.  To recap briefly:-

(1) On 6 June 2025, DHCJ Gary Lam ordered the Plaintiff to pay 1^st, 2^nd, and 3^rd Defendants’ costs in respect of the application to continue the Mareva injunction, summarily assessed at HK$700,000[4].

(2) On 10 November 2025, I ordered the Plaintiff to pay the 2^nd and 3^rd Defendants’ costs in respect of (i) the Plaintiff’s Application for Summary Judgment against the 2^nd Defendant and (ii) the 2^nd and 3^rd Defendants’ Application for Security for Costs against the Plaintiff, summarily assessed at HK$600,000[5].

(3) On 4 February 2026, I ordered the Plaintiff to pay the 2^nd and 3^rd Defendants’ costs in respect of a time-extension application, summarily assessed at HK$15,000.

(4) On 6 August 2025, DHCJ Reyes SC ordered the 1^st, 2^nd, and 3^rd Defendants to pay the Plaintiffs’ costs in respect of the application for paying US$7,888,406 into court and discharging the re-granted Mareva injunction, summarily assessed at HK$177,220.

47.  For completeness, it should also be mentioned that:-

(1) The Plaintiff and the Defendants had respectively taken out applications seeking to stay the execution of the aforesaid costs order made by DHCJ Gary CC Lam and DHCJ Reyes SC.

(2) Under paragraphs 82 to 85 of my Previous Decisions, I dismissed these applications. In gist, I took the view that (i) the costs order in question were meant to be payable forthwith, and it was open to the parties to enforce the same if they took the view that it would be desirable and feasible to do so[6]; and (ii) there was no reason why the parties might not attempt to conduct an offsetting exercise[7].

48.  The Defendants’ current stance is as follows:-

(1) The 1^st, 2^nd, and 3^rd Defendants accept that the costs that they are liable to pay the Plaintiff under DHCJ Reyes SC’s order dated 6 August 2025 (ie HK$177,220) can be set-off against the costs that the Plaintiff is liable to pay them under DCHJ Lam’s order 6 June 2025 (ie HK$700,000). Hence, as between the Plaintiff and the 1^st, 2^nd and 3^rd Defendants, the Plaintiff owes a net sum of HK$522,780 (ie HK$700,000 less HK$177,220).

(2) Under my costs orders dated 10 November 2025 and 4 February 2026, the Plaintiff owes the 2^nd and 3^rd Defendant an aggregate sum of HK$615,000 (ie HK$600,000 plus HK$15,000).

49.  Mr Ko and Mr O’Reilly referred me to Re Chan Chi Loi [2007] HKCLRT 437 at para 16. There, Chu J (as Chu VP then was) held that where a costs order does not distinguish between the costs payable to each receiving party, such costs are treated as a joint debt, and any receiving party is jointly and severally entitled to claim the entire costs from the paying party. Her Ladyship stated:-

“As regards the law, in each of the three aforesaid actions, the costs order awarded by the court in favour of the defendants was one set of costs which did not distinguish the costs payable to the individual defendants. Therefore, the costs are joint debts in nature and the various defendants are jointly and severally entitled to the taxed costs. As one of the defendants in those actions, the Creditor is certainly entitled to the taxed costs and to pursue the same against the Debtor. Therefore, in respect of the debts arising out of the costs, he has locus standi as a creditor and is entitled to issue a statutory demand. Once the Debtor paid to him all the taxed costs, the Debtor’s obligation under the costs orders would be discharged in full, and the other defendants could not make another claim against him for the same matter despite their also being beneficiaries of the costs orders.” (emphasis added)

50.  In the premises, I accept that the 2^nd and 3^rd Defendants have locus standi to pursue the aforesaid net costs of HK$522,780 against the Plaintiff, and the fact that the costs order was also made in favour of the 1^st Defendant is not a reason for depriving the 2^nd and 3^rd Defendants of their locus standi to recover the sum from the Plaintiff.

51.  Thus, adding up the aggregate costs of HK$615,000 under my orders dated 10 November 2025 and 4 February 2026, the Plaintiff owes the 2^nd and 3^rd Defendants total outstanding costs in the amount of HK$1,137,780 (ie HK$522,780 plus HK$615,000).

52.  As mentioned above, pursuant to my order in respect of the 2^nd and 3^rd Defendants’ Security for Costs Application against the Plaintiff[8], the Plaintiff had paid security for costs in the amount of HK$1.2 million into court.

53.  Against this background, the 2^nd and 3^rd Defendants took out the Payment Out Application on 26 January 2026. Their stance is that the sum of HK$1.2 million sitting in court should be utilized to pay the outstanding costs owed to them.

54.  However, on 10 August 2026, the Plaintiff’s solicitors issued a letter to the Defendants’ solicitors, indicating that:-

(1) The Plaintiff elected to pay the costs order made by DHCJ Gary CC Lam (in the amount of HK$700,000) to the 1^st Defendant “by virtue of a legal set-off against the Compensatory Judgment Debt and/or the Contempt Costs Order (quantified at US$1,331,983.50) due and owing by the 1^st Defendant to the Plaintiff under the United States Proceedings” (the “1^st Purported Set-Off Exercise”).

(2) The Plaintiff elected to pay the costs order made by me (in the total amount of HK$615,000) to the 3^rd Defendant “by virtue of a legal set-off against the Contempt Costs Order (quantified at US$1,331,983.50) which is jointly and severally due and owing by, amongst others, the 3^rd Defendant to the Plaintiff” (the “2^nd Purported Set-Off Exercise”)

55.  The issue before the court is whether the 1^st and 2^nd Purported Set-Off Exercises were valid and permissible.

56.  For the reasons elaborated below, I am of the view that the answer is in the negative.

57.  The starting point is that set-off requires mutuality in that the demands must be between the same parties, and they must be held in the same capacity or right, or interest: see Re Finbo Engineering Co Ltd [1998] 2 HKLRD 695 at 702A-B (per Le Pichon J, as Le Pichon JA then was), citing Derham on Set-Off (2^nd Ed) at pp.319 to 320.

58.  The following passage in Derham on the Law of Set Off (5^th Ed) at para 12.02 is highly pertinent to the present dispute between the parties:-

“The requirement of same parties often arises in the context of joint debts and demands. Joint debtors may employ the debt in a set-off against a cross-demand possessed by them jointly against the creditor, but a set-off will not generally arise as between, on the one hand, a joint debt or a joint demand, and, on the other a separate cross-claim possessed or a separate debt owing by one of the joint parties. Thus, in the case of a partnership, a joint debt of the partnership generally cannot be set off against a debt owed separately to one of the partners, and a separate debt of one of the partners cannot be set off against an obligation owed to the firm.” (emphasis added)

59.  Along the same vein, in Re Honey-bee Industrial Ltd (HCCW 515/1993, 16 February 1994) at p.3, Rogers J (as Rogers VP then was) stated:-

“As Mr Reyes pointed out in his submissions, whatever strength of the Defendant’s case against the 3^rd Plaintiff, any amount due to the Defendant from the 3^rd Plaintiff could not be set off against the joint debt owed to the 1^st and 3^rd Plaintiffs. It seems to me that the proposition is clearly set out in Halsbury Laws Vol 42 para. 437 and in the case of Piercy v Fynney (1871) LR 12 EQ 69.” (emphasis added)

60.  Applying the aforesaid legal principles, it is clear to me that the 1^st and 2^nd Purported Set-Off Exercises did not satisfy the requirement of mutuality:

(1) Insofar as the 1^st Purported Set-Off Exercise is concerned, whilst the total outstanding costs in the amount of HK$1,137,780 is owed and due to the 2^nd and 3^rd Defendants, even on the Plaintiff’s case, the US Judgment Debt and/or the Contempt Costs Order (quantified at US$1,331,983.50) is said to be due and owing by the 1^st Defendant only. There is plainly no mutuality as the 2^nd Defendant is not liable under the US Judgment Debt and/or the Contempt Costs Order.

(2) As regards the 2^nd Purported Set-Off Exercise, likewise, whilst the total outstanding costs in the amount of HK$1,137,780 is owed and due to the 2^nd and 3^rd Defendants, even on the Plaintiff’s case, the Contempt Costs Order (quantified at US$1,331,983.50) is said to be due and owing by the 3^rd Defendant only. There is no mutuality as the 2^nd Defendant is not liable under the Contempt Costs Order.

61.  In the premises, I conclude that the 1^st and 2^nd Purported Set-Off Exercises were invalid and impermissible, and the court shall proceed on the basis that the outstanding costs owed to the 2^nd and 3^rd Defendants in the amount of HK$1,137,780 have not yet been paid.

62.  There is no question that:-

(1) the purpose of requiring the Plaintiff to pay HK$1.2 million into court was to provide security in respect of the 1^st and 2^nd Defendants’ costs incurred in these proceedings; and

(2) the Plaintiff owes the 2^nd and 3^rd Defendants outstanding costs in the amount of HK$1,137,780.

63.  In the circumstances, it appears to me that the appropriate course to take is to allow the Payment Out Application to the extent of HK$1,137,780.

64.  I do not see any reason why the 2^nd and 3^rd Defendants shall not be allowed to recover their costs against the Plaintiff when a sum which was provided for the purposes of costs is readily available.

65.  Accordingly, I order that a sum of HK$1,137,780 be paid out in favour of the 2^nd and 3^rd Defendants out of the security of HK$1.2 million provided by the Plaintiff.

F. Disposition

66.  To sum up:-

(1) I enter summary judgment against the 1^st Defendant in terms of in terms of prayers 2 and 3 as pleaded in the Plaintiff’s statement of claim dated 3 March 2025;

(2) I dismiss the 1^st Defendant’s Security for Costs Application against the Plaintiff; and

(3) I order that a sum of HK$1,137,780 be paid out in favour of the 2^nd and 3^rd Defendants out of the security of HK$1.2 million provided by the Plaintiff.

67.  Costs should follow the event.

68.  I make a costs order nisi that:-

(1) The 1^st Defendant shall pay the Plaintiff’s costs in respect of the Plaintiff’s claims against the 1^st Defendant in this action, including all costs previously reserved as well as the costs in respect of (i) the Summary Judgment Application against the 1^st Defendant and (ii) the 1^st Defendant’s Security for Costs Application against the Plaintiff, to be taxed forthwith on a party-to-party basis if not agreed; and

(2) The Plaintiff shall pay the 2^nd and 3^rd Defendants’ costs in respect of the Payment Out Application, to be taxed forthwith on a party-to-party basis if not agreed (with certificate for 1 counsel).

69.  I thank Mr Randall Arthur, Mr Tony Ko, and Mr Sean O’Reilly for their helpful assistance.